Growing panic in the Hong Kong stock market. Time to buy?

The index fell to its lowest level since early 2009, that is, since the global financial crisis, Reuters estimated. Since the beginning of October, the Hang Seng Index has lost 14.7%, the biggest monthly loss in 14 years.

Chinese stocks have faced a steady sell-off for much of the year due to fears about the effects of the country’s quarantine restrictions and tensions with the U.S., Bloomberg reported.

“Investors seem increasingly concerned about three issues, in particular that China’s opening after quarantine measures may take longer than expected, China’s social priorities may take precedence over the economy, and Beijing’s emphasis on security means a higher risk premium,” strategists at Nomura Holdings said.

China’s manufacturing activity and services declined in October, according to China’s statistical office. It testifies that the restrictions imposed in connection with COVID-19 and the continuing recession in the real estate market are still putting pressure on one of the largest economies in the world.

Bloomberg estimates that foreign investors sold a total of 57.3 billion yuan ($7.9 billion) of Chinese Class A stocks in October, the most since March 2020, when the pandemic caused a global market crash.

However, look at this chart, it gives 3 reasons to go long when everyone else is selling.

HKX Index monthly chart

1. The market may be supported by the lower line of the parallel channel.
2. When the price breaks through the 2008-2009 low, it could trigger a sharp decline in the stock price – hence, the big players will have the liquidity to enter the market.
3. A break-down of the 600-point psychological level might have a similar effect.

Watch the volumes. Big money will leave traces of its trades on the chart.